The idea behind the spending multiplier is that new spending causes more spending, income, and output than just an amount equal to the new spending itself.

Question

Quizplus · Accepted Answer

The spending multiplier is a key concept in macroeconomics and is based on the idea of the multiplier effect. This occurs when an initial increase in spending leads to a larger increase in overall economic activity as the additional spending creates more income and increases demand for goods and services. The size of the spending multiplier depends on a number of factors, including the marginal propensity to consume and the size of the government or central bank's fiscal or monetary stimulus.

The Idea Behind the Spending Multiplier Is That New Spending